Under Armour Hopes to Outrun Nike

Jumps Into Declining Niche With Cross-Trainer While Rival Disappoints

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CHICAGO (AdAge.com) -- Nike has been touting its new cross-trainer line as "better than your better" in ads, but its launch wound up worse than that of its barely promoted predecessor.
Direct attack? Many thought this Nike ad was aimed at Under Armour.
Direct attack? Many thought this Nike ad was aimed at Under Armour.

The footwear industry has hoped that dueling performance trainers from Nike and Under Armour would rejuvenate the long-declining cross-trainer segment, but Nike's performance-trainer sales actually declined in March, the first month Sparq shoes were on the market.

"The Nike results have been termed disappointing by retailers," said Matt Powell, an analyst at SportsOneSource who tracks the footwear industry. "They haven't moved the needle."

The failure of Sparq -- which stands for speed, power, agility, reaction and quickness -- to gain early traction with consumers despite an aggressive marketing campaign featuring sports stars such as NFL Rookie of the Year Adrian Peterson and two-time NBA MVP Steve Nash might be seen as a bad omen for Under Armour's coming New Prototype, a performance trainer that is the marketer's first non-cleated shoe.

Second pair
Nike's sluggish start raises doubts about whether a recession was the best time to ask people to buy a second shoe, as performance trainers are generally regarded as the shoes athletes wear when they're training for whatever it is they wear their real game shoes for.

Nevertheless, Under Armour bet heavily on the performance trainer category, taking the unusual step of hyping the line with a 60-second Super Bowl spot three months before it was on the market. That bold step made Wall Street skittish enough to drop Under Armour's share price 35% in the two days following the announcement.

Thanks mostly to the Super Bowl ad, Under Armour spent about $6 million in measured media through February of this year, 37% of its entire 2007 spend, according to TNS Media Intelligence. The spot was followed with in-store clocks counting down to the release, an aggressive online preorder campaign, and more television and print adverting.

The self-produced ad was a slick, large-scale production featuring Under Armour's trademark gritty landscape and grunting athletes declaring, "The future is ours" -- which many observers took as a shot across Nike's bow. Likewise, many took Nike's Sparq ad declaration, "My better is better than your better" as aimed at Under Armour.

Small bone to fight over
For all the media spending and apparent taunting, the two companies are squabbling over a minuscule piece of the market. Performance trainers -- a subset of the shrinking cross-trainer category -- amount to $250 million in annual sales in a $19 billion footwear industry.

Nevertheless, as the first major clash between the two skilled brand marketers on Nike's traditional turf, the attention is inevitable. And analysts looking at the first round say it may favor Under Armour.

A Citigroup survey of retailers found that, while preorders of Under Armour shoes were "limited," more than a third of the retailers questioned expected the shoes to sell out in their stores. And 38% of retailers recommended the Under Armour model over Nike's Sparq, compared with only 21% recommending the Sparq.

"There was a general expectation among retailers we surveyed that UA's product launch will be successful, based primarily on the mounting hype and UA's loyal brand following in apparel," wrote Citigroup analyst Kate McShane.

School shoes
Several analysts said they expect the Under Armour launch to do particularly well at back-to-school time. "There are lots of kids totally devoted to the Under Armour brand, and this is the first UA shoe they can wear to school," Mr. Powell said.

More details of Under Armour's preorder results are likely to become public next week, when the company announces its first-quarter earnings.

VP-Brand Steve Battista declined to comment for this story, citing a Securities and Exchange Commission-mandated quiet period in the days before an earnings announcement. Nike also declined to comment on the matter.
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